The opinion of the court was delivered by: Seibel, J.
Before the Court are the Motions for Summary Judgment of the
Plaintiff, (Doc. 24), and the Defendants, (Doc. 34).*fn1
For the reasons below, Plaintiff's Motion is GRANTED and
Defendants' Motion is DENIED.
The following facts are undisputed except where noted. Plaintiff, a former employee of Defendant J&R Equipment, Inc. ("J&R") brings this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001--1461, as a result of Defendant Joseph T. Falanga's refusal to roll over Plaintiff's balance in the J&R Equipment, Inc. 401(k) Plan and Trust (the "Plan") to an Individual Retirement Account ("IRA"). (Doc. 1.)
Mr. Falanga was at all relevant times the sole owner of J&R and made all decisions regarding J&R's operation and business. (Ds' 56.1 ¶ 2.)*fn2 Plaintiff began working at J&R on or about April 28, 1998. (Id. ¶ 1.) Mr. Falanga set up the Plan on February 23, 2004. (Id. ¶ 3; Doc. 28, at 2.) At all relevant times, Mr. Falanga has served as the Plan's sole trustee and owed a fiduciary duty to Plan participants to oversee the Plan solely in their interest. (Ds' 56.1 ¶¶ 3--4.) Qualified Plan Consultants ("QPC"), a third-party, was hired to administer the Plan. (Falanga Aff. ¶ 10.)*fn3 Immediately upon becoming eligible, Plaintiff enrolled in and began paying a portion of his salary into the Plan, and J&R began making "safe harbor" and "profit sharing" contributions into Plaintiff's Plan account. (Ds' 56.1 ¶ 6.) At all relevant times, Plaintiff was a "covered employee" under the Plan and a Plan participant under ERISA. (Id. ¶ 5.)
Under the Plan, participants who resign may request distribution of their vested Plan balance: "[A]t the election of the Participant, the Administrator shall direct the Trustee that the entire Vested portion of the Terminated Participant's Combined Account be payable to such Terminated Participant on or after the Anniversary Date coinciding with or next following termination of employment." (Plan Document 48.)*fn4 "Anniversary Date" is defined as the last day of the "Plan Year," which in turn is defined as January 1 to December 31. (Plan Document 1, 11.) Moreover, Plan benefits will be paid to participants "without the necessity of formal claims." (SPD 19.) Upon termination of the Plan, participants are to be notified and distribution of accounts will be made "in a manner permitted by the Plan as soon as practicable." (Id.)
In 2001, Mr. Falanga offered to help Plaintiff build a new home on land purchased by Plaintiff so long as Plaintiff reimbursed Mr. Falanga for the cost of specific construction materials and specified subcontractors. (Falanga Aff. ¶ 6; Klepeis Aff. ¶ 5.) The house was completed in the fall of 2002, and in December 2003, Mr. Falanga presented Plaintiff with an invoice for $301,500. (Falanga Aff. ¶ 8; Klepeis Aff. ¶ 7.) Ultimately, Mr. Falanga accepted payment of $298,451.50 in full satisfaction of the invoice. (Falanga Aff. ¶ 8; Klepeis Aff. ¶ 7.)
In January 2005, Plaintiff, having been a full-time employee since starting, resigned from J&R. (Ds' 56.1 ¶ 7.) At this time, Plaintiff asked Mr. Falanga to roll over his Plan balance into an IRA of Plaintiff's choosing. (Klepeis Aff. ¶ 8; Ds' Mem. 4 (admitting first rollover request occurred in January 2005).)*fn5 Mr. Falanga did not respond to this request. (Falanga Aff. ¶ 10; Klepeis Aff. ¶ 8; see also Ds' Mem. 4 (stating Mr. Falanga would not accept the "first improper form request" of January 2005).) Plaintiff complained to QPC about Mr. Falanga's failure to respond to this request, and QPC told Plaintiff that his account was fully funded, but that it could not roll over his balance without direction from Mr. Falanga, which it never received. (Falanga Aff. ¶ 10; Klepeis Aff. ¶ 10.)*fn6 QPC directed Plaintiff to submit another request to Mr. Falanga. (Falanga Aff. ¶ 10; Klepeis Aff. ¶ 10.) As of December 31, 2005, Plaintiff's fully vested account balance, including J&R's contributions, totaled $63,936.41. (Falanga Aff. ¶ 9; Klepeis Aff. ¶ 9; Ex. H-1.) As of December 31, 2006, the fully vested balance in Plaintiff's Plan account was $71,638.64. (Falanga Aff. ¶ 13; Klepeis Aff. ¶ 14; Ex. H-2.)
In May 2006, Mr. Falanga sued Plaintiff in New York state court demanding additional payment of over $300,000 relating to Plaintiff's house. (Falanga Aff. ¶ 11; Klepeis Aff. ¶ 11; Falanga Dep. 88.*fn7 ) That lawsuit is still pending and is apparently quiescent. (Falanga Aff. ¶ 11; Klepeis Aff. ¶ 11; Falanga Dep. 88.)
On August 24, 2006, Plaintiff wrote Mr. Falanga a letter demanding his annual account statements for the Plan years 2005 and 2006, his current account statement, all reports filed relating to the Plan from January 1, 2004 until the date of the letter, and the forms Mr. Falanga claimed were necessary to effectuate his January 2005 rollover request. (Falanga Aff. ¶ 11; Klepeis Aff. ¶ 11.)
On January 24, 2007, using forms that Mr. Falanga supplied, Plaintiff submitted a written rollover request (the "2007 Rollover Request") for the direct transfer of his vested Plan funds as one lump sum into an IRA. (Ds' 56.1 ¶ 13; Ex. D-1.) This rollover request specified that the amount rolled over "be adjusted for any Plan earning allocation applicable to [Plaintiff's] Plan account balance ending December 31, 2006." (Ds' 56.1 ¶ 14; Ex. D-1, at 1.) Despite not being able to "see where [he] would ever deny a request for a rollover," (Falanga Dep. 20:12--13), in a February 19, 2007 letter to Plaintiff, Mr. Falanga denied the 2007 Rollover Request because it was not "received before the end of the valuation year." (Ex. E-11.) According to Mr. Falanga, this letter advised Plaintiff that the 2007 Rollover Request would be impossible to fulfill because the rollover had to be requested by the end of the plan year, December 31, 2006. (Falanga Dep. 21--22.)
Mr. Falanga admits that he did not know if that requirement exists under the Plan; instead, he relied solely on what QPC told him. (Id. at 24.) According to Mr. Falanga, valuation for all requests made during the previous plan year would take place before any distributions were made. (Id. at 21, 24.) The Plan Document, SPD, and rollover request forms, however, do not contain any requirement that a request must be made before the close of the "valuation year," define or use the term "valuation year," or provide notice of any such requirement to Plan participants. (P's 56.1 ¶ 16;*fn8 Starr Dep. 16, 19.*fn9
On July 16, 2008, Plaintiff submitted a second written rollover request to Mr. Falanga. (Ds' 56.1 ¶ 17; Ex. D-2.) Defendants did not comply with this request, and concede that they did not explain to Plaintiff their reason for noncompliance. (Ds' 56.1 ¶ 19; P's 56.1 ¶ 20.) According to Defendants, this request was denied because, sometime in the summer of 2008, Mr. Falanga made an application to the Internal Revenue Service to close the Plan, and as a result all Plan funds were frozen. (Ds' 56.1 ¶ 17; Falanga Dep. 28--29.) As of August 4, 2010, Plaintiff's Plan balance had decreased to $57,346.76. (Ds' 56.1 ¶ 19; Ex. H-5.)
On January 13, 2010, Plaintiff commenced this action to compel the rollover of his Plan funds into an IRA. (Doc. 1.) On or about January 20, 2011, Plaintiff received a letter from Rollover Systems, Inc. ("Rollover") stating that $57,312.76 had been transferred into an IRA managed by Rollover. (Klepeis Aff. ¶ 23; Ex. E-16.) The Court is not aware of any efforts by Plaintiff to recover the present value in the Rollover IRA from Rollover or Defendants. Plaintiff has filed this Motion for Summary Judgment, seeking a judgment as a matter of law that he was entitled to have his plan funds rolled over as of December 31, 2005, (P's Mem. 6),*fn10 and thus a judgment in the amount of $63,936.41,*fn11 plus prejudgment interest and attorneys' ...